Essays on regional inequalities, innovation and global connectivity

Abstract

This dissertation studies how global connectivity shapes local economic development, looking at regional inequalities and innovation. It empirically contributes to our current understanding of the local distributional effects of economic globalisation and the effects of international disintegration. This dissertation comprises five chapters, with the first one introducing and motivating the overarching theme and the four remaining being self-contained empirical papers. It refers to literature from economic geography, international economics, innovation studies, and economics of inequality, exploring the regional perspective in Europe and the US. In the first part, in Chapter 1, the overarching theme of the local distributional effects of economic globalisation is introduced. It describes the evolution of the current wave of economic globalisation, measured by trade, global value chains and the role of global companies such as multinational enterprises. While during this initial phase a stark upward trend in economic globalisation has been observed, concerns over its benefits have been increasingly voiced. In this period of “hyperglobalisation” the costs of economic globalisation have become more salient, spurring a backlash against globalisation. This dissertation provides evidence on globalisation-induced inequality at the regional level for the US and Europe and emphasises the need to address the local distributional effects. This specifically means compensating those that are adversely affected by economic globalisation, in order to avoid potential costs stemming from international disintegration. The second part contains three empirical papers, Chapter 2, Chapter 3 and Chapter 4, which provides evidence on the local distributional effects of economic globalisationin the US and Europe. The regional perspective regarding the effects of economic globalisation on inequality has often been neglected, which is one of the main intended contributions of this dissertation. Analysing the relationship at the regional level is particularly relevant as economic activity significantly varies across space and it can offer valuable insights that are only possible to uncover when examining at a more granular level. In this dissertation, distributional effects describe either inter-firm dynamics like innovation concentration or interpersonal income inequality. Chapter 2 looks at the relationship between multinational enterprises and intra-regional innovation concentration within US states. While patenting concentration measured by the Gini coefficient has increased for more than three decades, we still lack evidence on the role of global firms such as multinationals. Thus, the paper analyses to what extent the presence of multinationals influences inter-firm innovation concentration, showing a positive link between the presence of domestic-owned multinationals and patenting concentration, which is more pronounced with a high share of MNEs and for non-MNEs. Concentration between firms might also affect inequality between people. The second and third paper focus on the distribution of income, showing that engaging more in trade and global value chains is linked to higher interpersonal income inequality within European regions at the NUTS-2 level. Chapter 3 analyses how trade affects income inequality, finding a positive association between trade and regional income inequality changes, which varies based on trading partners. Chapter 4 studies the link between global value chain participation and income inequality, showing that it matters how regions participate in global value chains and in which sectors. In the third and final part of this dissertation, in Chapter 5, I focus on the effects of international disintegration, by looking at the effect of Britain’s decision to leave the European Union. It examines the effect of Brexit on the adoption of digital technologies by small and medium-sized enterprises in the UK from 2013-2019. By providing timely and detailed measures for digital technology adoption, it offers novel and deeper insights into SMEs’ reactions to this shock

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This paper was published in LSE Theses Online.

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